Impact of Tax Reform on NUA
Hi: When I distributed my 401K in May of 2017, I elected to use the NUA Strategy. I had wanted to wait until 2018, but I was concerned that NUA would be eliminated under Tax reform. Is there any chance that tax laws applying to NUA could be made retroactive to 2017, and increase the taxes I plan to pay in 2017? For example, could I be taxed on the full distribution value of the stock rather than on only the cost basis?
Thank you for any insights you have into NUA changes.
Permalink Submitted by Alan - IRA critic on Wed, 2017-10-25 00:40
Chances of that are extremely slim considering historical tax legislation. Most tax reform is prospective, although EGTRRA in 2001 provided rate cuts retroactively. Wiping out a transaction such as your LSD for NUA purposes is only remotely possible. I would not worry about such remote chances.
Permalink Submitted by Andrew Zahn on Wed, 2017-10-25 14:20
Alan: Thanks very much on your reply, which said that retroactive tax reform related to NUA is very unlikely. I have some former colleagues who are planning on taking NUA soon. Is there any risk of NUA being eliminated or phased out near term? If there is not much of a benefit to delaying the NUA distribution, should they distribute this year to assure the tax benefits are locked in? Other than proposals by the Obama administration and congress in 2016 to eliminate NUA for people born after 1966, I have not found any recent proposals. Thanks for any additional thoughts you or others may have.